Yesterday brought moderate gains for oil prices thanks to a relatively bullish EIA inventory report. Crude inventories showed a 0.4-million barrel build, well below market expectations and API forecasts. Both diesel and gasoline stocks fell on the week, providing some support for prices.
Today, oil prices are plummeting following comments from Russia’s Energy Minister Novak that OPEC does not need to react to current demand problems in China. When the coronavirus outbreak dampened demand, Saudi Arabia and other OPEC countries called for deeper cuts to prevent deeper price declines, but Russia was the holdout. As markets look ahead to the March OPEC meeting, the recent comment suggests Russia will continue to hold out on further production cuts.
In coronavirus news, China has promised stimulus for their economy, though the demand impact will likely takes months to take hold. Goldman Sachs Research argues that unlike stock markets, commodity markets cannot adequately price in future demand when current supply/demand dynamics are out of balance, suggesting that prices may get lower before rising. In other Goldman Sachs analysis, the on-going quarantine has had a substantial impact on their workforce, equivalent to “the entire US workforce taking an unplanned break for two months.” The US Dollar, a safe-haven for nervous investors, has soared to 3 ½-year highs, putting downward pressure on commodities such as oil.
The entire oil complex is seeing losses this morning as China continues posting negative news regarding the coronavirus. WTI crude oil is currently trading at $52.84, down $1.04 from yesterday’s close.
Fuel prices are seeing mixed degrees of losses. Diesel prices are currently trading at $1.6686, down 2.9 cents from Thursday’s close. Gasoline is trading at $1.6243 this morning, down 4.5 cents. Notably, before today the gap between diesel and gasoline has shrunk significantly, closing less than three cents away from each other yesterday, pointing to extremely weak diesel demand among the economic slowdown.